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The Economics of Lockdown

The COVID-19 pandemic has had dire effects on both public health and the economy. In reaction to the virus’s spread, many states have implemented stay‐​at‐​home orders and closures of all “nonessential businesses.” And national lockdowns have been mandated all over Europe.

These lockdowns raise all sorts of important economic questions:

How much of the coming downturn will be driven by government shutdowns as opposed to the changing consumer and producer behavior we’d expect because of the virus?

What will be the net consequences of lockdowns for economic welfare?

What factors determine the optimal length and scope of these more suppressive measures?

Are there alternatives to lockdowns that could achieve equivalent or higher benefits at lower total cost?